Building Contracts

Building Contracts

Letters of Agreement

For small-scale improvements you may need only a simple letter of agreement, signed by both parties. This should cover the following points:

• a brief description of the job to be done

• the agreed price for the work (with a copy of the contractor’s original quotation attached to the back of the letter)

• the person responsible for obtaining any necessary official approval for the work

• the agreed starting and finishing dates; the phrase ‘time is of the essence’ should be included if meeting the latter is important

• how you will pay for the work, and, if you have agreed to make staged payments, when they will fall due

• whether any part of the payment can be withheld in the event of a dispute arising between the parties, or on completion of the job, as a retainer against the cost of rectifying any defects found in the work.

 

Quotations as Contracts

Building Contracts Some contractors will supply quotations that are detailed enough to act as contracts, and may have the contractor’s standard terms and conditions printed on the back of the quotation. These are especially common among firms offering package deals on home improvements such as conservatories, kitchen refits and replacement windows. Always read the terms carefully before you sign: they are often more for the supplier’s benefit than yours, and once you have signed the document you are bound by them.

An exception to this involves contracts for products such as replacement windows and new kitchens that are ordered in very specific circumstances. If the seller calls at your home without invitation, or visits you by appointment after making an unsolicited telephone call, and you then place an order for goods during that visit, you have some rights of cancellation, even if you have signed a contract. These are as follows:

• written notice of these rights must be given to you when you sign the order; if it is not, the seller cannot enforce the contract

• you then have a ‘cooling-off’ period of seven days, within which you can cancel the order by writing to the seller. Any deposit that you paid when you signed the order must be returned to you in full.

According to the provisions of the Consumer Credit Act 1974, you may also be able to cancel a signed contract if you agreed to take credit to pay for the work. If the seller offers you credit directly, or acts as a broker by arranging credit for you with a professional lender, you can generally cancel the contract if all the following points apply:

• the goods/services cost between £100 and £30,000 and the amount of credit is less than £25,000.

• your house is not used as security for the loan

• you signed the credit agreement after discussing it face to face with the seller

• you signed it somewhere other (usually in your own home) than at the seller’s or lender’s premises.

You will be given a copy of the credit agreement when you sign it, and you must receive a second copy by post a few days later. These must both set out your rights of cancellation. You then have five days in which to decide whether you want to cancel the contract, starting from the date on which you received the second copy. Cancel the contract in writing, sending your letter to the seller by recorded delivery so that you have proof that it has been sent and received. A certificate of posting is important as the cancellation takes place as soon as you post the letter.

 

Making a contract

A contract is basically an agreement which is recognised by law. A contract may be made by word of mouth or in writing. A written contract is preferable as it provides clear evidence of what the parties intended at the time. The terms of verbal contracts can be difficult to prove. Written evidence is easier to prove than ‘his word against mine’ in the event of a dispute.

Building contracts are often complex documents. They should provide a contract for the builder’s services entailing payment related to progress, a start and end date, arrangements for possession of the site, insurance, and variations or changes to the works. They may involve not just the employment of a builder but also a contract administrator — whether an architect or a quantity surveyor. They also involve the procurement of materials and supply of goods which may be converted to become part of the property in the building. All these matters, as well as facilities to extend the time required for the builder to complete and damages to compensate the building owner if the work is delayed, should ideally be included in the drafting of the contract.

 

Formal contracts

A formal written contract must be the preferred course for the homeowner because it provides clarity and certainty compared to recollections of various conversations at different times. A building project is too costly an expenditure to leave to recollection and impressions of who said what to whom. It is unwise to risk undertaking a building project on a mere oral contract. At the very least, you should get the basics committed to writing, ie. what is to be done and how much it will cost. The project is far too important to be left to doubt, and to be left to pure reliance on the builder to perform (unless you are qualified in building surveying or architecture and engineering or law). Seek professional advice if in any doubt, otherwise you could find yourself spending exorbitant amounts of money and ending up in a dispute about unfilled expectations. What you want and what the builder can do may be completely different perceptions. What you want to aim at is narrowing perception to the realistic.

You should take advice about the precise form and wording of the contract. You may wish to insert particular clauses to deal with certain matters such as disputes.

 

Offer and acceptance

A contract consists of these essential elements:

• offer and acceptance – The agreement to do a certain amount of work, within a specified timescale

• consideration – The money you agree to pay the builder

• intention to create legal relations – A demonstration that the parties intend a binding legal relationship

• capacity – Parties must be over the age of 18 and of sound mind

• lawful objects – The objects (purposes) of the contract must be lawful otherwise the contract will not be enforceable.

There must be a clear offer and an unconditional acceptance of the offer. When you want to create a contract, seek tenders from various builders so that you can compare rates and prices for the work. Otherwise you will have no idea whether the price is reasonable or not. You should also seek advice about where to find reputable builders in your area and ideally find a good local one who has been in business for a reasonable time and is not likely to go out of business. You should invite tenders from at least three or four builders and compare. If in any doubt seek professional advice.

You can elect to have plans drawn up by a surveyor or architect and then submit them to a builder to price the work or ask the builder to prepare them. He will usually use his own surveyor and charge you for that. Your surveyor can prepare a Schedule of Works or specification which the builder will price. The specification is simply a list of building items — for example foundations, walls or windows — which are identified as part of the building and separately priced for materials and labour.

The tender you send out is what is termed an invitation to negotiate — it is not an offer. It does, however, become an offer in law when you accept the builder’s price for the work. It may then be said there is a binding agreement on the terms agreed, subject to a formal contract being drawn up.

 

Appointing an administrator

It is advisable in some projects to employ a project manager, who may be an architect or surveyor. This person effectively stands between yourself and the builder so that as your agent he can ensure the builder maintains progress, that the work is in accordance with the contract, that payments are properly certified and works valued, that you do not overpay, and that the works are completed in a reasonable time. This saves you having any confrontations with the builder, which can be harmful. It should also save you time and money in certain types of project.

 

24. April 2011 by admin
Categories: Building Regulations/Planning Permission | Tags: , | Comments Off on Building Contracts

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